Sweden moves forward with new R&D tax incentive

The Swedish Government has submitted the draft legislation, A New Tax Incentive for Research and Development, to the Council on Legislation (Lagrådet). The proposal would introduce a new tax incentive for research and development in Sweden in the form of a so-called super deduction.

In June 2023, the Government appointed a special inquiry to review, among other things, the current R&D rules in Sweden on reduced employer social security contributions and general payroll tax for persons working with research or development (the R&D deduction). In January 2025, the Inquiry submitted its interim report, Tax Incentives for Research and Development (SOU 2025:3), see TaxNews, nr 3, 2025 (sw). In January 2026, the Inquiry submitted its final report, Tax Incentives for Research and Development – A New Incentive Based on Salary Costs for R&D Personnel (SOU 2026:1), see TaxNews nr 2, 2026 (sw).

The final report proposed two alternative designs for a new tax incentive within the framework of income taxation:

• an enhanced cost deduction; or
• a so-called refundable tax credit.

Following the consultation process, the Government has now decided on a referral to the Council on Legislation (Lagrådet) proposing the introduction of an enhanced cost deduction in the income category of business activities, commonly referred to as a super deduction.

The Government proposes a new tax incentive, in addition to the current Swedish R&D incentive rules, in the form of an enhanced cost deduction corresponding to 200 percent of certain salary costs for personnel engaged in research and development within the meaning of the Act on special deductions (2023:747) when calculating employer social security contributions and the general payroll tax for persons working with research or development. The super deduction would be available in addition to deductions for salary costs under the general rules of the Income Tax Act.

The rules are proposed to be enacted on the 1st of January 2027.

The Government has also previously submitted a referral to the Council on Legislation (Lagrådet) proposing a broader definition of research and development. The intention is that this broader definition, see TaxNews, nr 23, 2026 (sw), should also apply for purposes of the super deduction.

An additional condition is proposed for the super deduction, namely that the relevant work must have been performed in a state within the European Economic Area.

The enhanced cost deduction is to be based on salary costs for the company’s own personnel working with research and development. The salary costs forming the basis for the deduction are salaries, fees, benefits and other remuneration for work, i.e. remuneration that constitutes a basis for employer social security contributions under the main rule in Chapter 2, Section 10 of the Social Security Contributions Act.

The super deduction would apply only to salary costs for employees. Remuneration for purchased services would not qualify, even where such services include R&D work. In such cases, the company performing the services should be able to claim the super deduction, provided that the other conditions are met.

The enhanced cost deduction would be claimed as a tax adjustment in the company’s income tax return for the same tax year as the underlying salary costs are deducted or added to the acquisition cost of an asset.

The Government proposes that the deduction should be voluntary. This is partly because the deduction has no connection to the company’s accounting and partly because it may not always be clear whether the conditions are met. An incorrect claim may, among other things, result in tax surcharges. Companies may also need to consider whether the benefit of the super deduction could be offset by other rules, such as the rules on top-up tax´(Pillar  Two Rules) and credit for foreign tax. The super deduction may also reduce the scope for interest deductions and allocations to tax allocation reserves.

KPMG welcomes that the Government is proceeding with a concrete proposal intended to strengthen Sweden’s international competitiveness and increase companies’ incentives to conduct R&D and attract R&D investments to Sweden. It is also welcoming that the current incentives are not removed due to this proposal, further strengthening Sweden’s competitiveness.

For the super deduction to be effective and achieve the Government’s objective, the proposed change to the definition in the referral to the Council on Legislation (Lagrådet) Tax Incentives for Research and Development must also be adopted.

The super deduction would primarily benefit profitable companies, as it would reduce taxable income and therefore corporate income tax payable. For profitable companies, the liquidity effect would generally be immediate.

Start-up companies and companies reporting a tax deficit would instead see an increase in their tax deficit, which can only be utilized once the company becomes profitable. The liquidity effect would therefore be delayed. Restrictions on deductions for deficits following certain changes in ownership may also affect the impact of the super deduction.

A reduction in corporate income tax payable may also affect a company’s ability to obtain credit for foreign tax.

Companies subject to the Top-up Tax Act may also be adversely affected. Under the amendments now being made to the Top-up Tax Act, so-called qualified tax incentives should not give rise to top-up tax. The Government assesses that the super deduction is a qualified tax incentive. Technically, the rules are designed so that the adjusted covered tax expense is increased by the lower of the tax effect of the super deduction and a cap amount. The cap amount may be calculated in different ways, based on salary costs or the value of certain tangible fixed assets. Companies with high salary costs for research and development but relatively low other salary costs or limited holdings of certain tangible fixed assets may therefore become liable to pay top-up tax.

As the super deduction is voluntary, companies should consider whether, and to what extent, the deduction should be claimed in order to avoid adverse effects from other tax perspectives.

The next step is for the Government to submit a bill. However, no decision to introduce the super deduction can be made before the elections in Sweden that will be held in September 2026. The new parliament after the election will decide on the matter. The election outcome, the economic situation and other factors may affect whether and when the super deduction is ultimately introduced. Hence, the proposed enactment on the 1st of January 2027 seems uncertain but our hope is that even the next Government, no matter the election result, sees the value this proposal has for future placement of R&D in Sweden.

Please contact us if you would like to discuss how the proposed super deduction may affect your company.

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The article in Swedish

Draft legislation: A news tax incentive for research and development, pdf 746 kB (sw)